The mechanics are a bit complicated, but here are the basics.

By powering up, you increase your 'voting power'. This means that your votes will be worth more , than a person who doesn't have a lot of Steem power.

In return for that, you can't freely transfer your Steem anymore. You still own the coins. But their is a 'cooldown' process required, to make your accessible again. Which we know as powering down.